Tax Season Reminder: How Solar Incentives Can Save You Money

Tax season is here, and if you installed solar in 2024, you could be eligible for significant tax savings! The federal Investment Tax Credit (ITC) and various California incentives help homeowners reduce the cost of their solar investment. But claiming these benefits requires proper documentation and timely filing.

If you haven’t gone solar yet, now is the time to plan for 2025—before incentives change or decrease. Keep reading to learn how you can maximize your tax savings and why acting sooner rather than later is a smart financial move.

The Federal Solar Tax Credit: Your Biggest Solar Savings Opportunity

The Investment Tax Credit (ITC) allows homeowners to deduct 30% of their total solar installation costs from their federal tax bill. This includes:

✅ Solar panels 

✅ Inverters 

✅ Battery storage (if installed at the same time) 

✅ Installation and labor costs 

✅ Permitting fees

How to Claim the ITC on Your Taxes

To claim your solar tax credit, follow these steps:

1. Ensure your system was installed and activated in 2024. Only systems that were fully operational by December 31, 2024, are eligible for this year’s credit.

2. Fill out IRS Form 5695. This form calculates your Residential Energy Credit and applies it to your tax return.

3. Include the credit amount on your IRS Form 1040. This directly reduces the amount you owe in taxes.

💡 Important Note: If your tax liability is less than the credit amount, the remaining credit can roll over to the next tax year!

Common Questions About Solar Tax Credits

Q: What if I don’t owe enough in taxes to use the full credit? 

You can carry over any unused portion of your solar tax credit to future tax years.

Q: Can I claim the tax credit if I financed my solar system? 

Yes! As long as you own the system (even with a loan), you qualify. However, leased systems do not qualify.

Q: Do battery storage systems qualify for tax credits? 

Yes! If you install a battery storage system at the same time as your solar panels, it qualifies for the 30% federal tax credit. If added later, it must be charged at least 100% by solar energy to qualify.

Q: Can I claim the solar tax credit if I installed my system but haven’t turned it on yet? 

No, your system must be fully installed and operational by December 31, 2024, to qualify for this year’s tax credit. If it was installed but not activated until 2025, you’ll need to claim the credit on your 2025 taxes instead.

Q: Does the tax credit cover solar panel maintenance or repairs? 

No, the tax credit only applies to the original cost of purchasing and installing the system. Maintenance, repairs, and panel replacements after installation are not eligible for the ITC.

Q: What happens if I sell my home after installing solar? 

If you sell your home after claiming the tax credit, you don’t have to repay it. In fact, solar can increase your home’s resale value, making it a great investment whether you stay or sell.

Q: Can I claim the credit if I installed solar on a rental property? 

No, the residential solar tax credit applies only to properties that you own and live in. However, there are separate tax incentives available for commercial and rental properties—consult a tax professional for details.

Final Reminder: File Your Taxes Correctly & Don’t Miss Out!

If you installed solar in 2024, make sure you take full advantage of these tax incentives when filing your return. If you’re still considering solar, start planning now to maximize your savings in 2025.

Why Timing Matters If You Don’t Have Solar.

If you haven’t installed solar yet, you may be wondering if you should wait. Here’s why acting now is your best move:

🔹 Uncertain Future Incentives – Federal tax credits are set at 30% through 2032, but policies can change. Locking in today’s incentives ensures you get the maximum benefit.

🔹 Increasing Electricity Rates – California has some of the highest electricity prices in the nation, and rates continue to rise. The sooner you switch to solar, the sooner you start saving.

🔹 Battery Storage Demand is Rising – As power outages and extreme weather events become more common, more homeowners are adding battery storage. Incentives like SGIP are available, but funding is limited and not guaranteed in future years.

🔹 Need help understanding your solar savings? Contact Planet Solar today for expert guidance on incentives, installation, and financing options!

Tax Season Reminder: How Solar Incentives Can Save You Money